Novatel Wireless Reports Third Quarter 2016 Financial Results

SaaS, Software and Services Revenues Increased at an Annualized Rate
of 36% during the Third Quarter

Improved Adjusted EBITDA Achieved for Fourth Consecutive Quarter

Subscribers for Ctrack® Fleet Management Telematics Solutions Grew at
an Annualized Rate of 20% during the Third Quarter

November 03, 2016 04:15 PM Eastern Daylight Time

SAN DIEGO--(BUSINESS WIRE)--Novatel Wireless, Inc. (NASDAQ: MIFI), a leading provider of solutions
for the Internet of Things (“IoT”), including software-as-a-service
(“SaaS”) solutions for the fleet telematics market, announced financial
results for the third quarter ended September 30, 2016.

“Novatel Wireless has been on an incredible journey over the past 12
months. With the pending sale of our MiFi business expected to close in
the first quarter of 2017, the Company’s transformation into a provider
of comprehensive IoT solutions is nearly complete. We now have
approximately 590,000 subscribers to the Company’s high-margin SaaS,
software and services offerings, with 20% annualized growth in
subscribers to the Company’s Ctrack fleet management telematics
solutions during the third quarter,” said Sue Swenson, Chair and CEO of
Novatel Wireless. “With another record quarter for SaaS, software and
services revenues driving the Company to a fourth consecutive quarter of
improved adjusted EBITDA, I look forward to a brighter future as we move
beyond our hardware roots and emerge as a pure-play IoT solutions
provider.”

Third Quarter 2016 Financial Highlights

The Company announced the following U.S. GAAP (“GAAP”) financial results
for the third quarter of 2016:

Revenue increased by 12.2% to $60.9 million in the third quarter of
2016, compared to $54.3 million in the third quarter of 2015.

Revenue from SaaS, software and services increased to $14.8 million in
the third quarter of 2016, from $2.2 million in the third quarter of
2015, as the Company continued its focus on IoT SaaS and services
solutions, including the Ctrack® telematics solutions (“Ctrack”) that
the Company acquired in the fourth quarter of 2015. Revenue from SaaS,
software and services increased to a record 24.3% of the Company’s
total revenue in the third quarter of 2016, compared to 4.1% of total
revenue in the third quarter of 2015.

Revenue from hardware products was $46.1 million in the third quarter
of 2016, a decrease of 11.3% from $52.0 million in the third quarter
of 2015, as the Company continues to strategically de-emphasize lower
margin hardware-only sales in favor of bundled solutions that include
higher-margin SaaS, software and services offerings.

Revenue from Ctrack products, which include a mix of hardware and
SaaS, software and services sold as a bundled telematics solution, was
$16.6 million in the third quarter of 2016.

Net loss was ($18.6 million), or ($0.34) per share, in the third
quarter of 2016, compared to a net loss of ($20.8 million), or ($0.38)
per share, in the third quarter of 2015. Net loss in the third quarter
of 2016 includes a $2.8 million legal settlement entered into by the
Company in September 2016 in connection with a breach of contract
claim related to the Company’s hardware products, a $2.4 million
reduction in the gain recognized in the second quarter associated with
the Company’s divestiture of certain hardware modules and related
assets in April 2016, $2.6 million of impairment charges primarily
related to certain developed technologies acquired with Feeney
Wireless (“FW”) in March 2015, and $3.3 million of other charges
related to the Company’s acquisition and divestiture activities.

As of September 30, 2016, the Company had cash and cash equivalents of
$17.2 million, with no amounts drawn down on its revolving credit
facility with Wells Fargo Bank.

The Company also announced the following non-GAAP financial results for
the third quarter of 2016. A reconciliation of these non-GAAP financial
measures to the Company’s GAAP financial results is included in the
tables accompanying this news release:

Non-GAAP gross profit increased by 56.7% to $23.5 million in the third
quarter of 2016, from $15.0 million in the third quarter of 2015,
driven by a combination of increased total revenues and the
contribution from the Company’s Ctrack and FW-branded SaaS, software
and services revenues. Ctrack and FW were both acquired by the Company
during 2015. Overall non-GAAP gross margin increased to a record 38.7%
in the third quarter of 2016, compared to 27.7% in the third quarter
of 2015, as the Company continued its transition toward an improved
mix of higher-margin IoT solutions with significant SaaS and recurring
revenue components.

Non-GAAP gross margin on SaaS, software and services was 67.3% in the
third quarter of 2016, compared sequentially to 74.2% in the second
quarter of 2016, primarily driven by revenues from high-margin SaaS
and software solutions delivered by Ctrack and FW, partially offset by
increased revenues from larger telematics customers. SaaS, software
and services revenues were not a meaningful contributor to the
Company’s revenues in the third quarter of 2015, as the Ctrack
acquisition did not occur until the fourth quarter of 2015.

Non-GAAP gross margin on hardware products increased to 29.5% in the
third quarter of 2016, compared to 25.4% in the third quarter of 2015,
primarily as a result of reduced sales of lower-margin legacy hardware
products in the third quarter of 2016.

The Company’s Ctrack telematics solutions which include a mix of
hardware, SaaS, software and services, generated non-GAAP gross
margins of 63.3% in the third quarter of 2016, continuing to drive the
Company’s overall gross margin expansion since the Company’s
acquisition of Ctrack in the fourth quarter of 2015.

Non-GAAP operating expenses were $23.3 million in the third quarter of
2016, compared to $16.3 million in the third quarter of 2015, an
increase of 42.9%, primarily due to the acquisition of Ctrack in the
fourth quarter of 2015. During the third quarter of 2016, the Company
implemented restructuring initiatives intended to improve its
strategic focus on its most profitable business lines while
de-prioritizing certain hardware-only product lines to non-carrier
customers.

Adjusted EBITDA increased to $2.3 million in the third quarter of
2016, compared sequentially to $1.7 million in the second quarter of
2016, and also compared year-over-year to ($0.3 million) in the third
quarter of 2015. Adjusted EBITDA improved in the third quarter of 2016
due to the Company’s emphasis on growing SaaS, software and services
revenue, while also rationalizing the costs associated with its
hardware business, in an effort to generate improved performance
across multiple areas of the Company. Adjusted EBITDA contributed by
Ctrack’s telematics solutions was $2.7 million in the third quarter of
2016.

Non-GAAP net loss for the third quarter of 2016 was ($1.8 million), or
($0.03) per share, compared sequentially to ($3.4 million), or ($0.06)
per share, in the second quarter of 2016, and also compared
year-over-year to ($1.9 million), or ($0.04) per share, in the third
quarter of 2015, as the Company continues to integrate its acquisition
of Ctrack and transition toward an improved mix of higher-margin IoT
solutions with significant SaaS and recurring revenue components.

Other Key Metrics

Q3-2016

Q2-2016

Q3-2015

Revenue

SaaS, Software and Services Revenue

$14.8 million

$13.7 million

$2.2 million

Non-GAAP Gross Margin

67.3

%

74.2

%

79.9

%

Hardware Revenue

$46.1 million

$49.1 million

$52.0 million

Non-GAAP Gross Margin

29.5

%

27.8

%

25.4

%

IoT Revenue(1)

$23.1 million

$23.9 million

$17.1 million

Non-GAAP Gross Margin

58.5

%

57.8

%

33.7

%

MiFi Revenue(1)

$37.8 million

$38.9 million

$37.1 million

Non-GAAP Gross Margin

26.5

%

25.7

%

26.3

%

Subscribers

Ctrack Fleet Subscribers

182,000

174,000

n/a

Ctrack Non-Fleet Subscribers

229,000

215,000

n/a

FW Subscribers

179,000

168,000

159,000

Total Consolidated Subscribers

590,000

557,000

159,000

_____________________________________________________

(1) The Company currently places primary emphasis on its mix of SaaS,
software and services revenues as compared to its hardware revenues.
However, since the Company has historically reported its mix of MiFi (or
mobile computing) revenues as compared to its IoT (or M2M) revenues,
these metrics are presented as well.

Inseego Corp.

The Company also announced today that it plans to reorganize its
business by creating a new holding company structure in connection with
its agreement to sell the Novatel Wireless broadband business to T.C.L.
Industries Holdings (H.K.) Limited (“TCL”). Effective November 9, 2016,
the Company will be known as Inseego Corp. (“Inseego”), the name of the
new holding company. The new corporate name is part of a branding
initiative focused on the Company’s IoT strategy and product roadmap,
including its SaaS solutions for the fleet telematics market, after the
sale of the Company’s mobile broadband business (including its MiFi®
branded hotspots and USB modem product lines) to TCL. The divestiture to
TCL is expected to close in the first quarter of 2017.

As part of its branding initiative, the Company will trade as “INSG” on
the Nasdaq Global Select Market, effective at the start of trading on
November 9, 2016.

Fourth Quarter and Future Business Outlook

The following statements are forward-looking and actual results may
differ materially. Please see the section titled “Cautionary Note
Regarding Forward-Looking Statements” at the end of this news release. A
more detailed description of risks related to our business is included
in the reports filed by the Company with the Securities and Exchange
Commission (the “SEC”).

Our guidance for the fourth quarter of 2016 reflects current business
indicators and expectations as of the date of this news release,
including current exchange rates for foreign currencies.

Fourth Quarter 2016 Outlook

Revenue

$58 million - $63 million

Non-GAAP Gross Margin

36.5% - 38.5%

Non-GAAP Operating Expenses

$21.0 million - $23.0 million

Adjusted EBITDA

$3.5 million - $4.5 million

Non-GAAP Net Loss Per Share

$(0.03) - $0.00

Weighted-Average Shares Outstanding

approximately 55 million

Our consolidated fourth quarter outlook above is inclusive of the
following anticipated contribution from Ctrack:

Revenue

$15.5 million - $17.5 million

Non-GAAP Gross Margin

62% - 67%

Adjusted EBITDA

$2.2 million - $3.2 million

In addition, commencing in the first quarter of 2017, after the expected
closing of the transaction with TCL, we anticipate that the Company will
be generating approximately $90 million in annualized revenues, with
non-GAAP gross margin of more than 60% and adjusted EBITDA margin of
approximately 10%.

Conference Call Information

Novatel Wireless will host a conference call and live webcast for
analysts and investors today at 5:00 p.m. ET. To access the conference
call:

In the United States, call 1-844-881-0135

International parties can access the call at 1-412-317-6727

Novatel Wireless will offer a live audio webcast of the conference call,
which will be accessible from the “Investors” section of the Company's
website at www.novatelwireless.com.
An audio replay of the conference call will also be available beginning
one hour after the call, through November 17, 2016. To hear the replay,
parties in the United States may call 1-877-344-7529 and enter access
code 10094743#. International parties may call 1-412-317-0088 and enter
the same code.

About Novatel Wireless, Inc.(Inseego Corp.)

Novatel Wireless, Inc., will be an Inseego Corp. company effective
November 9, 2016. Inseego is a leading global provider of
software-as-a-service (SaaS) and solutions for the Internet of Things
(IoT). Inseego sells its telematics solutions under the Ctrack brand,
including its fleet management, asset tracking and monitoring, stolen
vehicle recovery, and usage-based insurance platforms. Inseego also
sells business connectivity solutions and device management services
through Novatel Wireless, Inc. and Feeney Wireless (FW). With over 30
years of experience, Inseego provides customers with secure and
insightful solutions and analytics, with approximately 590,000 global
subscribers, including 182,000 fleet management subscribers. The Company
is headquartered in San Diego, California. www.novatelwireless.com
and www.inseego.com
@inseego (Twitter)

(currently Nasdaq:MIFI) (Nasdaq:INSG as of November 9, 2016)

Cautionary Note Regarding Forward-Looking Statements

Some of the information presented in this news release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In this context, forward-looking
statements often address expected future business and financial
performance and often contain words such as “may,” “estimate,”
“anticipate,” “believe,” “expect,” “intend,” “plan,” “project,” “will”
and similar words and phrases indicating future results. The information
presented in this news release related to our outlook for the fourth
quarter ending December 31, 2016 and our future business outlook, the
future demand for our products, the expected impact of acquisition,
divestiture and restructuring activities, statements made by Sue
Swenson, the Company’s plans to reorganize its business by creating a
new holding company structure, including the timing thereof and the
benefits expected to be realized from the new structure, as well as
other statements that are not purely statements of historical fact, are
forward-looking in nature. These forward-looking statements are made on
the basis of management's current expectations, assumptions, estimates
and projections and are subject to significant risks and uncertainties
that could cause actual results to differ materially from those
anticipated in such forward-looking statements. We therefore cannot
guarantee future results, performance or achievements. Actual results
could differ materially from our expectations.

Factors that could cause actual results to differ materially from the
Company’s expectations are set forth as risk factors in the Company's
SEC reports and filings and include (1) the future demand for wireless
broadband access to data and fleet management software and services,
(2) the growth of wireless wide-area networking and fleet management
software and services, (3) customer and end-user acceptance of the
Company's current product and service offerings and market demand for
the Company's anticipated new product and service offerings,
(4) increased competition and pricing pressure from participants in the
markets in which the Company is engaged, (5) dependence on third party
manufacturers and key component suppliers worldwide, (6) the success of
the Company’s corporate development activities, including integration of
Ctrack and FW and divestitures of lines of business that are not
essential to the Company’s strategy, (7) unexpected liabilities or
expenses, (8) the Company's ability to introduce new products and
services in a timely manner, (9) litigation, regulatory and IP
developments related to our products or components of our products,
(10) dependence on a small number of customers for a significant portion
of the Company’s revenues and (11) the Company's plans and expectations
relating to acquisitions, divestitures, strategic relationships,
international expansion, software and hardware developments, personnel
matters and cost containment initiatives, including restructuring
activities.

These factors, as well as other factors described in the reports filed
by the Company with the SEC (available at www.sec.gov),
could cause actual results to differ materially from those expressed in
the Company’s forward-looking statements. The Company assumes no
obligation to update publicly any forward-looking statements for any
reason, even if new information becomes available or other events occur
in the future, except as otherwise required pursuant to applicable law
and our on-going reporting obligations under the Securities Exchange Act
of 1934, as amended.

Non-GAAP Financial Measures

Novatel Wireless, Inc. has provided financial information in this news
release that has not been prepared in accordance with GAAP. Non-GAAP
gross profit, gross margin, operating expenses, adjusted EBITDA, net
loss and net loss per share exclude restructuring charges, share-based
compensation expense, amortization of the debt discount and debt
issuance costs associated with the Company’s convertible notes, a legal
settlement in September 2016 related to the Company’s hardware products,
a reduction in the gain recognized in the second quarter of 2016
associated with the Company’s divestiture of certain hardware modules
and related assets in April 2016, impairment charges primarily related
to certain developed technologies acquired with FW in March 2015, and
other charges related to the Company’s acquisition and divestiture
activities. Adjusted EBITDA also excludes interest, taxes, depreciation
and amortization (unrelated to acquisitions and the convertible notes),
and foreign currency transaction gains and losses.

Non-GAAP gross profit, gross margin, operating expenses, adjusted
EBITDA, net loss and net loss per share are supplemental measures of our
performance that are not required by, or presented in accordance with,
GAAP. These non-GAAP financial measures have limitations as an
analytical tool and are not intended to be used in isolation or as a
substitute for gross profit, gross margin, operating expenses, net loss,
net loss per share or any other performance measure determined in
accordance with GAAP. We present non-GAAP gross profit, gross margin,
operating expenses, adjusted EBITDA, net loss and net loss per share
because we consider each to be an important supplemental measure of our
performance.

Management uses these non-GAAP financial measures to make operational
decisions, evaluate the Company's performance, prepare forecasts and
determine compensation. Further, management believes that both
management and investors benefit from referring to these non-GAAP
financial measures in assessing the Company's performance when planning,
forecasting and analyzing future periods. Share-based compensation
expenses are expected to vary depending on the number of new grants
issued to both current and new employees and changes in the Company's
stock price, stock market volatility, expected option term and risk-free
interest rates, all of which are difficult to estimate. In calculating
non-GAAP gross profit, gross margin, operating expenses, adjusted
EBITDA, net loss and net loss per share, management excludes certain
non-cash and one-time items in order to facilitate comparability of the
Company's operating performance on a period-to-period basis because such
expenses are not, in management's view, related to the Company's ongoing
operating performance. Management uses this view of the Company’s
operating performance for purposes of comparison with its business plan
and individual operating budgets and in the allocation of resources.

The Company further believes that these non-GAAP financial measures are
useful to investors in providing greater transparency to the information
used by management in its operational decision-making. The Company
believes that the use of non-GAAP gross profit, gross margin, operating
expenses, adjusted EBITDA, net loss and net loss per share also
facilitates a comparison of our underlying operating performance with
that of other companies in our industry, which use similar non-GAAP
financial measures to supplement their GAAP results.

In the future, the Company expects to continue to incur expenses similar
to the non-GAAP adjustments described above, and exclusion of these
items in the presentation of our non-GAAP financial measures should not
be construed as an inference that these costs are unusual, infrequent or
non-recurring. Investors and potential investors are cautioned that
there are material limitations associated with the use of non-GAAP
financial measures as an analytical tool. The limitations of relying on
non-GAAP financial measures include, but are not limited to, the fact
that other companies, including other companies in our industry, may
calculate non-GAAP financial measures differently than we do, limiting
their usefulness as a comparative tool.

Investors and potential investors are encouraged to review the
reconciliation of our non-GAAP financial measures contained within this
news release with our GAAP financial results.

Following the planned reorganization, the stockholders of Inseego will
be asked to approve the sale of the Company’s mobile broadband business
to TCL. In order to solicit this approval, Inseego will file documents
with the SEC, including a definitive proxy statement relating to the
proposed sale. The definitive proxy statement will also be mailed to
Inseego’s stockholders in connection with the proposed sale. Investors
and security holders are urged to read these documents when they become
available because they will contain important information about Inseego,
the mobile broadband business and the proposed sale. Investors and
security holders may obtain free copies of these documents and other
related documents when they are filed with the SEC at the SEC’s web site
at www.sec.gov
or by directing a request to Inseego, c/o Novatel Wireless, Inc., 9645
Scranton Road, Suite 205, San Diego, California 92121, Attention:
Stockholder Services.

Inseego and its directors and executive officers may be deemed
participants in the solicitation of proxies from the stockholders of
Inseego in connection with the proposed sale. Information regarding the
interests of these directors and executive officers in the proposed
transaction will be included in the definitive proxy statement when it
is filed with the SEC. Additional information regarding the directors
and executive officers of Inseego is also included in Novatel Wireless,
Inc.’s Annual Report on Form 10- K for the year ended December 31, 2015,
which was filed with the SEC on March 15, 2016 and the definitive proxy
statement relating to Novatel Wireless, Inc.’s 2016 Annual Meeting of
Stockholders, which was filed with the SEC on April 29, 2016. These
documents are available free of charge at the SEC’s web site at www.sec.gov
and from Stockholder Services at Novatel Wireless, as described above.

(a) Includes share-based compensation expense recorded under ASC Topic
718.

(b) Includes amortization of intangible assets purchased through
acquisitions.

(c) Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as the
amortization of the step-up to fair value of finished goods acquired
through acquisitions and impairment charges primarily related to certain
developed technologies acquired with FW.

(d) Includes a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.

See “Non-GAAP Financial Measures” for information regarding our use of
Non-GAAP financial measures.

NOVATEL WIRELESS, INC.

Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
Operating Costs and Expenses

Three Months Ended September 30, 2016

(In thousands)

(Unaudited)

GAAP

Share-basedcompensation expense(a)

Purchased intangibles amortization(b)

Restructuring charges

Legal settlement(c)

Acquisition- anddivestiture-related
charges(d)

Non-GAAP

Cost of net revenues

$

37,957

$

49

$

562

$

—

$

—

$

—

$

37,346

Operating costs and expenses:

Research and development

7,942

201

—

—

—

—

7,741

Sales and marketing

7,953

170

—

—

—

—

7,783

General and administrative

14,551

695

—

—

2,800

3,322

7,734

Amortization of purchased intangible assets

1,008

—

1,008

—

—

—

—

Impairment of purchased intangible assets

2,594

—

—

—

—

2,594

—

Restructuring charges

794

—

—

794

—

—

—

Total operating costs and expenses

$

34,842

1,066

1,008

794

2,800

5,916

$

23,258

Total

$

1,115

$

1,570

$

794

$

2,800

$

5,916

(a) Includes share-based compensation expense recorded under ASC Topic
718.

(b) Includes amortization of intangible assets purchased through
acquisitions.

(c) Includes a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.

(d) Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as impairment
charges primarily related to certain developed technologies acquired
with FW.

See “Non-GAAP Financial Measures” for information regarding our use of
Non-GAAP financial measures.

NOVATEL WIRELESS, INC.

Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
Operating Costs and Expenses

Nine Months Ended September 30, 2016

(In thousands)

(Unaudited)

GAAP

Share-basedcompensation expense(a)

Purchased intangibles amortization(b)

Restructuring charges

Legal settlement(c)

Acquisition- anddivestiture-related
charges(d)

Non-GAAP

Cost of net revenues

$

123,291

$

156

$

1,604

$

—

$

—

$

1,829

$

119,702

Operating costs and expenses:

Research and development

24,248

662

—

—

—

—

23,586

Sales and marketing

24,062

593

—

—

—

—

23,469

General and administrative

34,744

2,026

—

—

2,800

4,980

24,938

Amortization of purchased intangible assets

2,912

—

2,912

—

—

—

—

Impairment of purchased intangible assets

2,594

—

—

—

—

2,594

—

Restructuring charges

1,685

—

—

1,685

—

—

—

Total operating costs and expenses

$

90,245

3,281

2,912

1,685

2,800

7,574

$

71,993

Total

$

3,437

$

4,516

$

1,685

$

2,800

$

9,403

(a) Includes share-based compensation expense recorded under ASC Topic
718.

(b) Includes amortization of intangible assets purchased through
acquisitions.

(c) Includes a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.

(d) Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as the
amortization of the step-up to fair value of finished goods acquired
through acquisitions and impairment charges primarily related to certain
developed technologies acquired with FW.

See “Non-GAAP Financial Measures” for information regarding our use of
Non-GAAP financial measures.

NOVATEL WIRELESS, INC.

Reconciliation of GAAP Loss before Income Taxes to Adjusted EBITDA

(In thousands)

(Unaudited)

Three Months EndedSeptember 30, 2016

Nine Months EndedSeptember 30, 2016

Loss before income taxes

$

(19,355

)

$

(33,626

)

Depreciation and amortization(a)

3,603

10,836

Share-based compensation expense(b)

1,115

3,437

Restructuring charges

794

1,685

Legal settlement(c)

2,800

2,800

Acquisition- and divestiture-related charges(d)

5,916

9,403

Interest expense, net(e)

3,877

11,712

Other expense (income), net(f)

3,560

(986

)

Adjusted EBITDA

$

2,310

$

5,261

(a) Includes depreciation and amortization charges, including
amortization of intangible assets purchased through acquisitions.

(b) Includes share-based compensation expense recorded under ASC Topic
718.

(c) Includes a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.

(d) Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as the
amortization of the step-up to fair value of finished goods acquired
through acquisitions and impairment charges primarily related to certain
developed technologies acquired with FW.

(e) Includes the amortization of the convertible senior notes discount
and issuance costs.

(f) For the three months ended September 30, 2016, primarily includes a
decrease in the gain recognized in the second quarter of 2016 related to
the Company’s sale of certain hardware modules and related assets, as
well as unrealized foreign currency losses on an outstanding
intercompany loan between Ctrack and one of its wholly-owned foreign
subsidiaries, which is re-measured at each reporting period. For the
nine months ended September 30, 2016, primarily includes the gain on the
Company’s sale of certain hardware modules and related assets, partially
offset by unrealized foreign currency losses on an outstanding
intercompany loan between Ctrack and one of its wholly-owned foreign
subsidiaries, which is re-measured at each reporting period.

See “Non-GAAP Financial Measures” for information regarding our use of
Non-GAAP financial measures.